MacBook Pros now use subscription accounting?

Hi everyone, I’ve been on a self-imposed moratorium for a while but still lurk from time to time. In exchange for the useful tidbits I still do glean, I wanted to point this out, because I haven’t seen it noted anywhere and I think the implications to shareholders are HUGE…

Someone with better knowledge of all this can correct me if I’m wrong, but from what I understand, Apple just released EFI Firmware Update 1.7…which, it seems to this lay user at least, will “unlock greater functionality” of the new MacBook Pros…which means Apple will need to use subscription accounting for this product line, since they are not charging for the new feature…and such an accounting method has not to this point been announced…which means that unbeknownst to all analysts and investors, Apple’s estimates for this quarter do not include a substantial amount of income that will be deferred and thus will result in even higher revenue growth moving forward!

If this is the case, Apple is truly setting itself up to be a revenue-generating behemoth for many years to come, no matter how unpredictable its sales figures may become… Thoughts?

I’d say this is more a “fix” than a material product enhancement, though it does provide for use of unsupported drives.

I don’t see Apple moving to subscription accounting on the Mac line. It would be contrary to established practices and unless the company changed its operating policies in terms of offering free OS X commercial upgrades for a set period from purchase, SOX wouldn’t apply.

If it were true, it would imply to me that Snow Leopard will be the beginning of the merging of iPhone and Mac OS’s, and and that Mac OS X would, like iPhone OS not be supplied “jailbroken”. Jailbreak would be a customer decision (explicitly blessed by Apple in the Mac case). This is the long term solution to the risk some assert that Mac will become a major target for virus and malware writers.

That in turn would open the way to further discounting of the sticker price of Macs in exchange for service commitment (mobileme etc). We might see a final loss of power of MS’s hardware partners, mirroring the loss of power of the mobile handset makers to the government-annointed carriers.

If it were true, it would imply to me that Snow Leopard will be the beginning of the merging of iPhone and Mac OS’s, and and that Mac OS X would, like iPhone OS not be supplied “jailbroken”. Jailbreak would be a customer decision (explicitly blessed by Apple in the Mac case). This is the long term solution to the risk some assert that Mac will become a major target for virus and malware writers.

That in turn would open the way to further discounting of the sticker price of Macs in exchange for service commitment (mobileme etc). We might see a final loss of power of MS’s hardware partners, mirroring the loss of power of the mobile handset makers to the government-annointed carriers.

Sleepy you lost me at the jailbroken part. The codebase for both OSs are converging for sure. Some of the 1000 new API for Iphone 3.0 were rewritten from existing NS code base. As Apple transitions it’s carbon libraries to Cocoa I’m sure they will open up more of the existing OS X libraries for use under Iphone OS but Apple has adopted different naming conventions so I don’t see them going back to a single code base anytime soon. As far as the jailbreak. The security model on the iphone with sandboxing of applications makes data and file sharing between applications a problem. Until Apple opens up a mechanism for sharing data across the sandbox and creates a file system which can be used by applications the iphone developer will have to create workarounds. For instance with 3.0 you can mail from within your application but you can’t grab a mail file attachment edit it and then send it back out since your application was not the creator of the original file.
As far as service revenue. Many of the Microsoft OS and software licenses are sold to enterprise as seat licenses which include OS/software upgrades during the license period. The power of MS hardware partners IMO is IT and centralized control of IT in larger organizations. Apple can hardly get a foot in the door unless anointed by the chief priest of IT. The good thing is Apple is finally being allowed onto the networks at major corporations and adding additional machines once on the approved list is a no brainer compared to getting on the approved list.

On the topic of MacBook Pro. The firmware change would no way require subscription accounting. Firmware is updated on devices all the time under normal accounting. Think about the Ipod how many software updates or a firmware fix from Nividia to fix graphics issues.

Pats, I agree with everything you say here. I don’t see that contradicts a configuration of MacOS where all installed apps are of Apple-tracked provenance, and all Apps have control over the provenance of any data file in their sandbox.

OTOH my post began with “if”. I don’t actually think there will be Macbook subscription accounting in the near future; so my previous post is moot.

But I do think that with iPhone OS, Apple is attempting to offer both consumers and enterprise IT a platform that gives the reliability, security and ease of use they need. At present they believe they need other legacy baggage, and that is preventing progress. In the case of enterprise IT, the specialists of course don’t want an Apple style solution, because it reduces their role and influence. This is described in the IT press as Apple making no effort to meet the requirements of enterprise customers.

OK, let’s suppose that Apple includes cell radio chips, or WiMax capability in future Macs/laptops, and that the service supplier subsidizes the price of the machine in return for a multi-year service contract. What this might look like is that a company like Clearwire subsidizes the cost of a MacBook (maybe half the retail price) that is WiMax equipped in return for a two year service contract at $75 per month. That would require subscription accounting.

One of the tie-ins would be that with such a machine, cloud computing would be a reality. This would be very attractive to Apple with their existing MobileMe base, and it would be one reason that Apple has spent so much money lately on server farm facility space. Tell me where I’m off the tracks here.

Again, I don’t believe the deferred revenue accounting applies simply from a subsidized price model. In fact, I don’t of another cell phone handset maker that uses the deferred revenue model although most cell handsets are sold at subsidized prices.

What matters is if the product is shipped in a way that its current or future feature set is considered incomplete. For example, if Apple sold a Mac that had hardware features that would be “turned on” or activated at a later date for free or under the current iPhone scenario, commits to two years of free commercial upgrades thus conspicuously enhancing the functionality or features of the product after the moment of original sale. This is why iPod touch owners pay $9.99 for the iPhone 3.0 and iPhone users are receiving it for free. In my understanding of SOX, Apple necessarily must charge for Snow Leopard or the company would run into issues over the accounting for the sales of Macs.

Look at it another way: Let’s say AT&T offered customers a MacBook Pro for $499 in return for a two-year services bundle on cell phone, home Internet and satellite or other TV services. Apple would not be obliged to use deferred revenue on Mac sales. A 3rd party subsidy is not the determining factor.

I can’t think of another cell phone handset maker that uses the deferred revenue model although most cell handsets are sold at subsidized prices.

This is testimony to Apple’s complete dominion over this market. The very idea of a product purchased today having greater utility and value next year is foreign to most electronics consumers. I doubt that most can grasp the concept But they have their Blackberry to keep them warm. It is a rare consumer product that qualifies for such accounting treatment.

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